It seems Europeans still have a long road to go, and the Germans, who are key in Europe's money muddle (this is the title of an early and famous book by Robert Triffin that suddenly props up in my mind, Europe and the Money Muddle) do not seem to be the most helpful partners in this challenging and urgent endeavour. Varoufakis wrote yesterday a sharp and alarming article about Schaeuble and his disciples published by The Guardian in which he warns that the Germans want France to obey to German (and Dutch and others) austerity rules: "Germany won't spare Greek pain -- it has an interest in breaking us".

Grexit postponed: How the euro was saved by sinking Greece

Europe has been in a state of economic
crisis for so long that it has started to feel inevitable. It is not.
The European Union went into a recession along with the rest of the
world in 2008; unlike Canada and the United States, much of the
continent has never come out. Two of the EU’s largest countries, Italy
and Spain, have recovered so little that their economies are smaller
than they were seven years ago. The same goes for Portugal.

The unemployment rate for the euro zone,
the 19 countries using the common euro currency, is 11.1 per cent –
higher, after all these years of supposed recovery, than the Canadian
unemployment rate at the bottom of the recession. Italy’s unemployment
rate was just 6.1 per cent in 2007; it has since more than doubled.
Spain’s count, 22.5 per cent, is nearly triple the prerecession figure.

And
leading the parade of the downtrodden, there’s Greece. Nearly 26 per
cent of working-age adults are unemployed. More than half its young
people are jobless. Gross domestic product has declined by a quarter
since 2007. Even if Greece could return to a modest rate of growth, it
wouldn’t regain its 2007 level of output and wealth until some time in
the 2020s. No Canadian recession, not the stagflation of the early 1970s
or the downturn of the early 1990s, even comes close.

None
of this had to be. It is not some divine punishment for economic sins.
The catastrophe is the product of a series of policy choices made by
human beings. Different choices would have led to a different outcomes,
and still could, but instead of figuring out how to get out of
recession, Europe’s political class keeps turning to policies that have
pushed large parts of the continent deeper into it.

Late
last year, Greek voters elected a government that promised to go to war
against the European establishment, and make it change course. Can you
blame them? The status quo is clearly not working for Greece, or for a
lot of other Europeans. It’s why, across the continent, we are seeing
the rise of angry parties on the extreme right and left. The solutions
they propose are often entirely off-base. But the problem they are
responding to is real.

In Greece, that
reality is extreme. The more the country’s government cuts spending and
services, the more an economy in recession contracts further. Greece’s
European partners have repeatedly demanded that Greece return to
economic health by dramatically chopping public spending, and Athens has
largely complied. It has not worked.

The
more Athens cuts, the more its economy is shrunk by the cuts, and the
more Greece’s unsustainable debt burden, now at 177 per cent of GDP,
grows relative to a shrinking economy. This is not some fanciful theory.
It’s just arithmetic. Absent other ways of stimulating the economy –
say, a lower currency, or an export and tourist boom sparked by recovery
in the rest of the euro zone – Europe’s cure for Greece always promised
pain without gain.

As we went to
press, Greece and the EU leadership appeared to be very close to an
agreement to keep the country from defaulting on its debts, to prevent
its banking system from collapsing, and to keep it from exiting the euro
zone.

To get such an agreement,
however, Greece’s leaders have had to capitulate. After months of
negotiations, and even after convincing the Greek people to vote No in a
snap referendum on Europe’s harsh demands for more austerity, Greek
Prime Minister Alexis Tsipras is now bending his knee and saying, Yes.
In return, his government is asking for what appears to be only modest
debt relief.

It is a stunning
climbdown. Mr. Tsipras’s Syriza party came to power aiming to convince
Europe that a change of economic course was needed not just for Greece,
but for all Europeans. Europe’s governing elite shrugged. If euro zone
finance ministers accept the Greek offer – not yet a certainty, but
likely – the result will not be the revolution Mr. Tsipras once hoped
for. For the third time in five years, Greece will be signing up for the
maintenance of the status quo.

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org